Absa Group LimitedFinancial results for the reporting period ended 31 December 2018

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(1)Financial results for the reporting period ended 31 December 2018. WorldReginfo - c6a885b5-80c8-4ff7-a852-fb065100e2f3. Absa Group Limited.

(2) Report overview This financial results booklet for the reporting period ended 31 December 2018 is one of the publications released at the time of the Absa Group Limited’s (Absa Group or the Group) financial results announcement made on 11 March 2019. It is supplemented with additional disclosures, including the Group’s JSE SENS announcement and the annual financial results presentation. The full set of documents is available on www.absa.africa. 1. Reportable segment changes > The South Africa Banking segment has been removed in the Group’s segmental disclosures to align with how the banking operations are now managed. > Rest of Africa (RoA) Banking was renamed to Absa Regional Operations (ARO) in order to align to the new Absa Group brand.. 2. Business portfolio changes The following business portfolio changes resulted in the restatement of financial results for the comparative periods. None of the restatements have impacted the overall financial position or net earnings of the Group. > The Group refined its treasury allocation methodology, resulting in the restatement of net interest income, gains and losses from banking and trading activities, cash and cash equivalents and investment securities between and within segments. > The Group continued refining its cost allocation methodology, resulting in the restatement of operating expenses between and within segments. > Corporate and Investment Banking South Africa (CIB SA) aligned its customer portfolio to be more industry specific which resulted in reallocation of loans and advances to customers from Corporate, to Investment Banking.. 3. Accounting policy changes The Group changed its accounting policies relating to the valuation of policyholder liabilities under the Group’s life insurance contracts within WIMI, as well as the presentation of interest income and interest expense. Refer to page 179 to 181 for additional information.. 4. Correction of prior period error The Group determined that certain intra-day 'due for settlement accounts' in respect of long and short proprietary positions with the JSE have been incorrectly netted in prior reporting periods, regardless of the fact that these accounts are not permitted to be net settled. Correction of this error did not have an impact on profit or loss, or equity, but it did result in a gross up of other assets and other liabilities.. 5. Adoption of new International Financial Reporting Standards (IFRS) New IFRSs have been adopted of which IFRS 9 Financial Instruments (IFRS9) and IFRS 15 Revenue from Contracts with Customers (IFRS 15) have the most significant impact on the Group’s results. Refer to page 6 to 36 for more information.. Finance is responsible for establishing a strong control environment over the Group’s financial reporting processes and serves as an independent control function advising business management, escalating identified risks and establishing policies or processes to manage risk. Finance is led by the Group’s Financial Director who reports directly to the Chief Executive Officer. The Financial Director has regular and unrestricted access to the Board of Directors as well as to the Group Audit Compliance Committee (GACC). Together with the GACC, the Board has reviewed and approved the reporting changes contained in the announcements released on 11 March 2019. The GACC and the Board are satisfied that the changes disclosed in the Financial result in fair presentation of the consolidated financial position and comply, in all material respects, with the relevant provisions of the Companies Act, IFRS and interpretations of IFRS, and SAICA’s Reporting Guides.. Absa Group Limited (1986/003934/06) The term Absa Group or the Group, refers to Absa Group Limited and its subsidiaries. Financial results for the reporting period ended 31 December 2018 Date of publication: 11 March 2019 These annual financial results were prepared by Absa Group Financial Control under the direction and supervision of the Absa Group Limited Financial Director, J P Quinn CA (SA). This report is printed on recycled paper that is 100% post-consumer waste sourced from either office or printing waste with no harmful chemicals used during the bleaching process. The byproducts of production of the paper are recycled into fertiliser, building materials and heat.. The full set of documents is available on www.absa.africa. WorldReginfo - c6a885b5-80c8-4ff7-a852-fb065100e2f3. The Board of Directors oversees the Group’s activities and holds management accountable for adhering to the risk governance framework. To do so, directors view reports prepared by the businesses, risk and others. They exercise sound independent judgement, and probe and challenge recommendations, as well as decisions made by management..

(3) Contents IFC Report overview 2 About Absa Group. 127 IFRS Group performance 128 Consolidated IFRS salient features. 5 Normalised Group performance. 129 Consolidated IFRS statement of comprehensive income 131 Consolidated IFRS statement of financial position. 6 Normalised Group performance overview. 132 Consolidated IFRS statement of changes in equity. 7 Reconciliation of IFRS to normalised results. 136 Consolidated IFRS statement of cash flows. 9 Normalised salient features. 137 Condensed IFRS notes to the consolidated financial statements. 10 Normalised salient features by segment. 142 IFRS segment performance. 11 Profit and dividend announcement. 144 Barclays PLC separation effects. 16 Basis of preparation 17 Dividend announcement. 147 Reporting changes. 18 Condensed consolidated normalised statement of comprehensive income. 148 Overview of reporting changes. 20 Condensed consolidated normalised statement of financial position. 150 Initial adoption of IFRS 9 Financial Instruments 178 Adoption of IFRS 15 Revenue from Contracts with Customers. 22 Condensed consolidated normalised statement of changes in equity. 179 Accounting policy amendments. 24 Condensed consolidated normalised statement of cash flows 25 Performance indicators and condensed normalised notes to the consolidated financial statements. 59 Segment performance. 181 Correction of prior period error 181 Changes to reportable sections and business portfolios. 183 Risk management 184 Risk management overview 195 Capital management and RWA. 60 Segment performance overview 64 Segment report per market segment. 201 Appendices. 66 Segment report per geographical segment 68 Retail and Business Banking South Africa. 202 Segment report per market segment. 85 CIB. 204 RBB. 96 Absa Regional Operations. 206 Share performance. 102 RBB Absa Regional Operations. 207 Shareholder information and diary. 106 CIB Absa Regional Operations. 208 Glossary. 114 WIMI. 215 Abbreviations and acronyms. Dividend per share. Key dates. Shareholder communications. Final. 620 cents. Financial year-end. 31 December 2018. Interim. 490 cents. Dividend payment:. 15 April 2019. Annual general meeting. 04 June 2019. Shareholder information. page 207. Contact details. page 217. Icons used with this report. Positive. Remains the same. Negative. Increase/decrease. Absa Group Limited Interim financial results for the reporting period ended 31 December 2018. 1. WorldReginfo - c6a885b5-80c8-4ff7-a852-fb065100e2f3. 217 Administration.

(4) About Absa Group We are a diversified standalone African financial services group, delivering an integrated set of products and services across personal and business banking, corporate and investment banking, wealth, investment management and insurance. headline earnings increased by 3% (CCY +4%) to R16 128m. Income growth of 4% has improved slightly despite the adverse impact of IFRS 9 and lower prevailing interest rates across our ARO markets on the net interest margin.. Normalised return on equity of 16.8%. Low earnings growth of 3% in SA businesses while earnings outside of South Africa (SA) showed stronger growth (CCY +10%) and provided portfolio diversification. ARO has shown the highest growth (CCY +13%) mainly from lower impairments with Retail and Business Banking (RBB) SA earnings up 2%, WIMI earnings 3% higher and with CIB SA earnings down 1% mainly reflecting the impact of single name credit impairments.. Normalised. and headline earnings per share increased by 4% as pre-provision profits increased by 1% (CCY +2%) and impairments were 10% lower.. increased from the prior year (16.5%) and has been supported by improved returns from ARO as well as lower capital and reserves from the impact of IFRS 9 adoption.. Good growth of R103bn. in gross customer advances 13% (CCY +12%). was supported by strong growth in CIB SA (+25%) and ARO (CCY +12% ); RBB SA advances growth of 6% is showing improving trends following growth in production across most of the product houses and improving market share.. from 0.87% to. 0.73% reflecting the impact of the reclassification. of suspended interest on cured accounts from income to impairments, as well as lower charges across all business units except for CIB SA due to single name impairments.. 2. Absa Group Limited Financial results for the reporting period ended 31 December 2018. WorldReginfo - c6a885b5-80c8-4ff7-a852-fb065100e2f3. Credit loss ratio reduced. Negative Jaws of (1.7%) reflects operating cost growth of 5% which is faster than income growth. Normalised cost-to-income ratio has increased to 57.7% from 56.7%..

(5) Our purpose Bring your possibility to life means we are helping individuals, small businesses, corporates, economies, and society at large to grow. A strategy for. growth. WorldReginfo - c6a885b5-80c8-4ff7-a852-fb065100e2f3. Growth. Three strategic commitments Growing our portfolio while contributing to the growth of the markets we serve. Reducing costs by creating a more efficient and effective organisation. ›› Delivering top, sustainable returns that maximise long-term value. ›› ››. Three strategic. targets. To grow revenue faster, on average, than the SA bank sector from 2019 to 2021, with an improving trend over time and within appropriate risk appetite parameters. ›› To consistently reduce our normalised cost-to-income ratio to reach the low 50s by 2021. ›› To achieve a normalised group return on equity of 18% to 20% by 2021, while maintaining an unchanged dividend policy. ››. Absa Group Limited Financial results for the reporting period ended 31 December 2018. 3.

(6) WorldReginfo - c6a885b5-80c8-4ff7-a852-fb065100e2f3 4. Absa Group Limited Financial results for the reporting period ended 31 December 2018.

(7) WorldReginfo - c6a885b5-80c8-4ff7-a852-fb065100e2f3. Normalised Group performance 6 Normalised Group performance overview 7 Reconciliation of IFRS to normalised results 9 Normalised salient features 10 Normalised salient features by segment 11 Profit and dividend announcement 16 Basis of preparation 17 Dividend announcement 18 Condensed consolidated normalised statement of comprehensive income 20 Condensed consolidated normalised statement of financial position 22 Condensed consolidated normalised statement of changes in equity 24 Condensed consolidated normalised statement of cash flows 25 Performance indicators and condensed normalised notes to the consolidated financial statements. Absa Group Limited Financial results for the reporting period ended 31 December 2018. 5.

(8) ››. 5 Normalised Group performance 59 Segment performance 127 147 183 201. IFRS Group performance Reporting changes Risk management Appendices. 6 7 9 10 11 18 25. Overview Reconciliation of IFRS to normalised results Normalised salient features Normalised salient features by segment Profit and dividend announcement Financials Notes to the financials. 60 Overview 64 Per market segment 66 Per geographical segment. 68 85 96 114. RBB South Africa CIB South Africa Absa Regional Operations WIMI. Normalised Group performance overview for the reporting period ended 31 December. Headline earnings per ordinary share (HEPS) (cents and change %)1. Dividend per ordinary share (DPS) (cents and change %). 1 913.4 1 687.2. 1 769.6. 1 845.6 1 000. 1 538.4. 1 030. 1 070. 925. 4%. 4% 2014. 1 110. 2015. 2016. 2017. 2018. Net asset value (NAV) per ordinary share (cents and change %)1 10 588. 10 980. 11 573. 2014. 2015. 2016. 2017. 2018. Return on equity (RoE) (%)1. 11 985. 9 764. 16.7. 17.0. 16.6. 16.5. 16.8. 2014. 2015. 2016. 2017. 2018. 2014. 1. 6. 2015. 2016. 2017. 2018. These numbers have been restated, refer to the reporting changes overview on the inside cover page.. Absa Group Limited Financial results for the reporting period ended 31 December 2018. WorldReginfo - c6a885b5-80c8-4ff7-a852-fb065100e2f3. 4%.

(9) 128 129 137 142 144. IFRS salient features Financials Notes to the financials Segment performance Barclays separation. 148 Overview of reporting changes 150 Initial adoption of IFRS 9 Financial Instruments (IFRS 9) 178 Adoption of IFRS 15 Revenue from Contracts with Customers (IFRS 15) 179 Accounting policy amendments. 184 Risk management overview 195 Capital management and RWA. 202 204 206 207 208 215. Segment report per market segment RBB Share performance Shareholder information and diary Glossary Abbreviations and acronyms. Reconciliation of IFRS to normalised results for the reporting period ended 31 December. IFRS Group performance 2018. Barclays separation effects 2018. Normalised Group performance 2018. Net interest income Non-interest income. 43 755 32 760. 330 525. 43 425 32 235. Total income Impairment losses Operating expenses Other expenses Share of post-tax results of associates and joint ventures. 76 515 (6 324) (46 803) (2 026) 179. 855 — (3 161) (194) —. 75 660 (6 324) (43 642) (1 832) 179. Operating profit before income tax Tax expenses. 21 541 (6 282). (2 500) 484. 24 041 (6 766). Profit for the reporting period. 15 259. (2 016). 17 275. 13 917 801 351 190. (1 986) (30) — —. 15 903 831 351 190. 15 259. (2 016). 17 275. 14 142. (1 986). 16 128. 4.65 0.73 42.8 4 8 61.2 29.2. n/a n/a n/a n/a n/a n/a n/a. 4.64 0.73 42.6 4 5 57.7 28.1. 841 720 53 140 135 420 258 464. — — — 3 192. 841 720 53 140 135 420 255 272. 1 288 744. 3 192. 1 285 552. Statement of comprehensive income (Rm). Profit attributable to: Ordinary equity holders Non-controlling interest – ordinary shares Non-controlling interest – preference shares Non-controlling interest – additional Tier 1 Headline earnings. Operating performance (%) Net interest margin on average interest-bearing assets Credit loss ratio on gross loans and advances to customers and banks Non-interest income as % of total income Income growth Operating expenses growth Cost-to-income ratio Effective tax rate. Statement of financial position (Rm). Total assets Deposits due to customers Debt securities in issue Other liabilities Total liabilities. 736 305 160 971 269 862 1 167 138. — — (5 561)1 (5 561). 736 305 160 971 275 423 1 172 699. 121 606. 8 753. 112 853. 1 288 744. 3 192. 1 285 552. RoA. 1.17. n/a. 1.34. RoE. 13.4. n/a. 16.8. Capital adequacy Common Equity Tier 1. 16.1 12.8. n/a n/a. 15.4 12.0. 1 700.4. n/a. 1 910.0. Equity Total equity and liabilities. WorldReginfo - c6a885b5-80c8-4ff7-a852-fb065100e2f3. Loans and advances to customers Loans and advances to banks Investment securities Other assets. Key performance ratios (%). Share statistics (cents) Diluted headline earnings per ordinary share. 1. This represents the contribution of R12.1bn that was received from Barclays PLC, net of amounts already spent on separation activities. The cash received is held centrally by Treasury and is presented as an intersegmental asset in ‘Other liabilities’. The amount is presented in ‘Loans from Barclays separation segment’ in the Condensed consolidated normalised statement of financial position (refer to page 20).. Absa Group Limited Financial results for the reporting period ended 31 December 2018. 7.

(10) 5 Normalised Group performance 127 147 183 201. IFRS Group performance Reporting changes Risk management Appendices. ››. 59 Segment performance. 6 7 9 10 11 18 25. Overview Reconciliation of IFRS to normalised results Normalised salient features Normalised salient features by segment Profit and dividend announcement Financials Notes to the financials. 60 Overview 64 Per market segment 66 Per geographical segment. 68 85 96 114. RBB South Africa CIB South Africa Absa Regional Operations WIMI. Reconciliation of IFRS to normalised results for the reporting period ended 31 December. IFRS Group performance 2017. Barclays separation effects 2017. Total Group normalised performance 2017. Net interest income Non-interest income1. 42 644 30 750. 325 80. 42 319 30 670. Total income Impairment losses Operating expenses Other expenses Share of post-tax results of associates and joint ventures. 73 395 (7 022) (43 304) (2 270) 170. 405 — (1 901) (394) —. 72 990 (7 022) (41 403) (1 876) 170. Operating profit before income tax Tax expenses1. 20 969 (5 882). (1 890) 408. 22 859 (6 289). Profit for the reporting period. 15 087. (1 482). 16 569. 13 888 789 362 48. (1 482) — — —. 15 370 789 362 48. 15 087. (1 482). 16 569. 14 378. (1 245). 15 623. 4.83 0.87 41.9 1 8 59.0 28.1. n/a n/a n/a n/a n/a n/a n/a. 4.83 0.87 42.0 1 3 56.7 27.5. 749 772 55 426 111 409 252 988. — — — 912. 749 772 55 426 111 409 252 076. 1 169 595. 912. 1 168 683. Statement of comprehensive income (Rm). Profit attributable to: Ordinary equity holders1 Non-controlling interest – ordinary shares Non-controlling interest – preference shares Non-controlling interest – additional Tier 1 Headline earnings. 1. Operating performance (%) Net interest margin on average interest-bearing assets2 Credit loss ratio on gross loans and advances to customers and banks Non-interest income as % of total income Income growth Operating expenses growth Cost-to-income ratio Effective tax rate Loans and advances to customers Loans and advances to banks Investment securities Other assets1 Total assets Deposits due to customers Debt securities in issue Other liabilities1 Total liabilities Equity. 3. Total equity and liabilities. 689 867 137 948 222 522. — — (9 840)3. 1 050 337. (9 840). 689 867 137 948 232 362 1 060 177. 119 258. 10 752. 108 506. 1 169 595. 912. 1 168 683. 1.27 14.2 16.1 13.5. n/a n/a n/a n/a. 1.39 16.5 14.9 12.1. 1 724.5. n/a. 1 845.6. Key performance ratios (%) RoA RoE Capital adequacy Common Equity Tier 1. Share statistics (cents) Diluted headline earnings per ordinary share1. 1 2. 3. 8. These numbers have been restated, refer to the reporting changes overview on the inside cover page. Net interest margin has been restated to reflect an update of the Group’s policy for classifying assets as interest bearing or non-interest bearing. The updated policy classifies reverse repurchase transactions entered into for regulatory purposes as interest bearing; under the previous policy these transactions were classified as non-interest bearing. Under the previous policy the Group’s net interest margin would have been 4.77% (2017: 5.05%) on IFRS and 4.80% (2017: 4.95%) on normalised basis. This represents the contribution of R12.1bn that was received from Barclays PLC, net of amounts already spent on separation activities. The cash received is held centrally by Treasury and is presented as an intersegmental asset in ‘Other liabilities’. The amount is presented in ‘Loans from Barclays separation segment’ in the Condensed consolidated normalised statement of financial position (refer to page 20).. Absa Group Limited Financial results for the reporting period ended 31 December 2018. WorldReginfo - c6a885b5-80c8-4ff7-a852-fb065100e2f3. Statement of financial position (Rm).

(11) 128 129 137 142 144. IFRS salient features Financials Notes to the financials Segment performance Barclays separation. 148 Overview of reporting changes 150 Initial adoption of IFRS 9 Financial Instruments (IFRS 9) 178 Adoption of IFRS 15 Revenue from Contracts with Customers (IFRS 15) 179 Accounting policy amendments. 184 Risk management overview 195 Capital management and RWA. 202 204 206 207 208 215. Segment report per market segment RBB Share performance Shareholder information and diary Glossary Abbreviations and acronyms. Normalised salient features for the reporting period ended 31 December. 2018. 2017. Change %. 75 660 43 642 15 903 16 128. 72 990 41 403 15 370 15 623. 4 5 3 3. 841 720 1 285 552 736 305 93.8. 749 772 1 168 683 689 867 90.6. 12 10 7. 16.8 1.34 2.12 5.10 n/a. 16.5 1.39 2.17 n/a 3.75. 4.64 0.73 42.6 57.7 (2) 28.1. 4.83 0.87 42.0 56.7 (3) 27.5. 847.8 840.2 842.9 844.4. 847.8 845.6 846.5 846.6. 1 913.4 1 910.0 1 886.7 1 883.3 1 110 1.7 11 985 11 273. 1 845.6 1 845.4 1 815.7 1 815.5 1 070 1.7 11 573 11 030. 15.4 15.4. 14.9 15.0. 12.0 11.2. 12.1 11.6. Statement of comprehensive income (Rm) Income1 Operating expenses Profit attributable to ordinary equity holders1 Headline earnings1. Statement of financial position Loans and advances to customers (Rm)2 Total assets (Rm)1 Deposits due to customers (Rm) Loans to deposits and debt securities ratio (%). Financial performance (%) Return on equity (RoE)1 Return on average assets (RoA) Return on risk-weighted assets (RoRWA) Stage 3 loans ratio on gross loans and advances Non-performing loans (NPL) ratio on gross loans and advances. Operating performance (%) Net interest margin on average interest-bearing assets3 Credit loss ratio on gross loans and advances to customers and banks2 Non-interest income as percentage of total income Cost-to-income ratio Jaws Effective tax rate. Share statistics (million) Number of ordinary shares in issue Number of ordinary shares in issue (excluding treasury shares) Weighted average number of ordinary shares in issue1 Diluted weighted average number of ordinary shares in issue1. Share statistics (cents) Headline earnings per ordinary share1 Diluted headline earnings per ordinary share1 Basic earnings per ordinary share1 Diluted basic earning per ordinary share1 Dividend per ordinary share relating to income for the reporting period Dividend cover (times) NAV per ordinary share1 Tangible NAV per ordinary share1. 4 4 4 4 4 — 4 2. Absa Group Limited Absa Bank Limited. WorldReginfo - c6a885b5-80c8-4ff7-a852-fb065100e2f3. Capital adequacy (%) Common Equity Tier 1 (%) Absa Group Limited Absa Bank Limited. 1 2. 3. These numbers have been restated, refer to the reporting changes overview on the inside cover page. Current year figures have been prepared in accordance with IFRS 9 reporting standards, whilst comparatives (2017) had been prepared in accordance with IAS 39 reporting standards. Net interest margin has been restated to reflect an update of the Group’s policy for classifying assets as interest bearing or non-interest bearing. The updated policy classifies reverse repurchase transactions entered into for regulatory purposes as interest bearing; under the previous policy these transactions were classified as non-interest bearing. Under the previous policy the Group’s net interest margin would have been 4.80% (2017: 4.95%).. Absa Group Limited Financial results for the reporting period ended 31 December 2018. 9.

(12) 5 Normalised Group performance 59 Segment performance IFRS Group performance Reporting changes Risk management Appendices. ››. 127 147 183 201. 6 7 9 10 11 18 25. Overview Reconciliation of IFRS to normalised results Normalised salient features Normalised salient features by segment Profit and dividend announcement Financials Notes to the financials. 60 Overview 64 Per market segment 66 Per geographical segment. 68 85 96 114. RBB South Africa CIB South Africa Absa Regional Operations WIMI. Normalised salient features by segment for the reporting period ended 31 December. 2018. 20171. Change %. Headline earnings (Rm) 8 880 3 367 3 218 1 268 (605). 8 748 3 411 2 954 1 231 (721). RBB South Africa CIB South Africa. 2.68 1.72. 2.72 1.82. Absa Regional Operations. 1.75. 1.77. 24.0 15.6 18.5 21.7. 23.1 16.3 16.6 20.8. 0.94 0.36 0.77 (0.45). 1.10 0.24 1.34 1.58. 465 921 272 139 97 244 5 734 682. 446 894 219 065 77 863 5 004 946. 4 24 25 15 (28). 333 061 173 832 133 656 5 097 90 659. 300 725 177 255 108 636 5 150 98 101. 11 (2) 23 (1) (8). RBB South Africa CIB South Africa Absa Regional Operations WIMI Head Office, Treasury and other operations in South Africa. 2 (1) 9 3 (16). Return on average risk-weighted assets (%). Return on regulatory capital (%) RBB South Africa CIB South Africa Absa Regional Operations2 WIMI3. Credit loss ratio (%) RBB South Africa CIB South Africa Absa Regional Operations WIMI. Loans and advances to customers (Rm) RBB South Africa CIB South Africa Absa Regional Operations WIMI Head Office, Treasury and other operations in South Africa RBB South Africa CIB South Africa Absa Regional Operations WIMI Head Office, Treasury and other operations in South Africa. 1 2. 3. 10. These numbers have been restated, refer to the reporting changes overview on the inside front cover. As the Absa Regional Operations consists primarily of a set of legal entities, the denominator in the RoRC for the Absa Regional Operations is calculated as the sum of the average equity of the legal entities. As WIMI consists primarily of a set of legal entities with a smaller contribution from the Wealth division of Absa Bank Limited, the denominator in the RoRC for WIMI is calculated as the sum of average legal entities’ equity including the regulatory capital (RC) contribution for the Wealth division.. Absa Group Limited Financial results for the reporting period ended 31 December 2018. WorldReginfo - c6a885b5-80c8-4ff7-a852-fb065100e2f3. Deposits due to customers (Rm).

(13) 128 129 137 142 144. IFRS salient features Financials Notes to the financials Segment performance Barclays separation. 148 Overview of reporting changes 150 Initial adoption of IFRS 9 Financial Instruments (IFRS 9) 178 Adoption of IFRS 15 Revenue from Contracts with Customers (IFRS 15) 179 Accounting policy amendments. 184 Risk management overview 195 Capital management and RWA. 202 204 206 207 208 215. Segment report per market segment RBB Share performance Shareholder information and diary Glossary Abbreviations and acronyms. Profit and dividend announcement for the reporting period ended 31 December. Salient features ››. Absa Group discloses International Financial Reporting Standards (IFRS) financial results and a normalised view, which adjusts for the financial consequences of separating from Barclays PLC.. ››. Diluted normalised HEPS grew 4% to 1 910.0 cents from 1 845.4 cents.. ››. The Group declared a 4% higher full year dividend per share of 1 110 cents.. ››. RBB South Africa headline earnings grew 2% to R8.9bn, CIB South Africa declined 1% to R3.4bn, Absa Regional Operations (previously known as Rest of Africa Banking) rose 9% to R3.2bn and WIMI increased 3% to R1.3bn.. ››. Normalised RoE increased slightly to 16.8%.. ››. Normalised revenue grew 4% to R75.7bn and operating expenses rose 5% to R43.6bn, resulting in a 57.7% cost-to-income ratio.. ››. Pre-provision profit increased 1% to R32.0bn on a normalised basis.. ››. Credit impairments fell 10% to R6.3bn, resulting in a 0.73% credit loss ratio from 0.87%.. ››. Absa Group’s normalised Common Equity Tier 1 (CET 1) ratio of 12.0% remains above regulatory requirements and our board target range.. ››. Normalised NAV per share rose 4% to 11 985 cents.. Normalised reporting Given the process of separating from Barclays PLC, Absa Group continues to report IFRS-compliant financial results and a normalised view. The latter adjusts for the consequences of the separation and better reflects its underlying performance. The Group will present normalised results for future periods where the financial impact of separation is considered material. Normalisation adjusts for the following items: R330m of interest earned on Barclays PLC’s separation contribution (2017: R325m); hedging revenue linked to separation activities of R525m (2017: R80m); operating expenses of R3 161m (2017: R1 901m) and R194m of other expenses (2017: R394m), plus a R484m (2017: R408m) tax impact of the aforementioned items. In total, these adjustments added R1 986m (2017: R1 245m) to the Group’s normalised headline earnings during the period. Since normalisation occurs at a Group level, it does not affect divisional disclosures.. Overview of results On a normalised basis, Absa Group’s headline earnings grew 3% to R16 128m from R15 623m and diluted HEPS rose 4% to 1 910.0 cents from 1 845.4 cents. The Group’s normalised RoE was 16.8% from 16.5% and its return on assets was 1.34% from 1.39%. Revenue grew 4% to R75.7bn, with net interest income and non-interest income rising 3% and 5% respectively. The Group’s net interest margin (on average interest-bearing assets) decreased to 4.64% from 4.83%, largely due to adopting IFRS 9. Gross loans and advances to customers grew 13% to R872bn, while deposits due to customers rose 7% to R736bn. With operating expenses growing 5%, the normalised cost-to-income ratio increased to 57.7% from 56.7%, and pre-provision profit rose 1% to R32.0bn. In constant currency (CCY), pre-provision profit grew 2% and headline earnings 4%. Credit impairments fell 10% to R6.3bn, resulting in a 0.73% credit loss ratio from 0.87%. The Group’s normalised NAV per share increased 4% to 11 985 cents and it declared a 4% higher full year DPS of 1 110 cents.. WorldReginfo - c6a885b5-80c8-4ff7-a852-fb065100e2f3. RBB South Africa’s headline earnings rose 2% to R8 880m primarily due to 10% lower credit impairments. Retail Banking South Africa headline earnings grew 2% to R6 359m, while Business Banking South Africa increased 1% to R2 521m. CIB South Africa’s earnings declined 1%, given 76% higher credit impairments. Corporate South Africa grew 4% to R1 171m and Investment Banking South Africa decreased 4% to R2 196m. Absa Regional Operations’ (ARO) headline earnings grew 9% to R3 218m, or 13% in CCY, with RBB up 26% and CIB increasing 7%. WIMI’s headline earnings increased 3% to R1 268m, with continuing business line earnings up 8%. South African earnings grew 3% to R13.0bn, while Africa Regions rose 6% or 10% in CCY to account for 20% of Group earnings.. Operating environment For the year, global growth is estimated to have remained at 3.7%, but was less synchronised among the larger developed markets. Growth in the United States (US) accelerated, supported by tax cuts, while political uncertainty and concern over trade slowed growth in the Euro Area and the United Kingdom (UK). Global trade tensions, a stronger dollar and concerns about US policy tightening increased market volatility. Global inflation firmed on higher oil prices and weaker emerging market currencies. Monetary policy continued on a gradual tightening path, but is likely to become more restrictive by the end of 2019. South Africa recorded its first recession since the last global financial crisis in the first half of 2018. The recession was short-lived as economic activity rebounded in the third quarter at an annualised rate of 2.6% from negative 0.5% in the previous quarter. In the fourth quarter, GDP growth slowed to an annualised rate of 1.4% as gross fixed capital formation fell for the fourth consecutive quarter. For the year, GDP growth moderated to 0.8% from 1.4% in 2017. Weak labour markets and moderating confidence weighed on the consumers’ appetite for credit and willingness to spend. Headline consumer price inflation finished 2018 at 4.5% year on year, broadly similar to its level at the beginning of the year, having ranged from 3.8% to 5.2% in the intervening months. The Reserve Bank cut the repurchase rate by 25bps in March but reversed this in November (+25bps), citing upside risks to the inflation outlook. Economic growth in our key Africa regions faced significant uncertainties and headwinds during 2018. On a GDP-weighted basis and excluding South Africa, the region’s economy grew by an estimated 5.6% in 2018, down from 5.8% in 2017. Monetary policy tightened in a number of markets on the back of weaker currencies and rising inflation.. Absa Group Limited Financial results for the reporting period ended 31 December 2018. 11.

(14) 5 Normalised Group performance 59 Segment performance IFRS Group performance Reporting changes Risk management Appendices. ›. 127 147 183 201. 6 7 9 10 11 18 25. Overview Reconciliation of IFRS to normalised results Normalised salient features Normalised salient features by segment Profit and dividend announcement Financials Notes to the financials. 60 Overview 64 Per market segment 66 Per geographical segment. 68 85 96 114. RBB South Africa CIB South Africa Absa Regional Operations WIMI. Profit and dividend announcement for the reporting period ended 31 December. Group performance Statement of financial position IFRS 9 replaced IAS 39 on 1 January 2018, in terms of which credit impairments moved from an incurred basis to an expected credit loss approach (ECL). The Group applied IFRS 9 retrospectively, with an adjustment to retained earnings and other reserves as at 1 January 2018, and elected not to restate comparative periods. The Group has reconsidered the treatment of post write-off recoveries in the calculation of the portfolio’s accounting for LGD, since the previously published results as at 30 June 2018. The Group will exclude post write-off recoveries from LGD for accounting purposes. The exclusion of post write-off recoveries from LGD has significantly increased the allowance for ECL as at 1 January 2018: ››. The restated allowance for ECL is R29 703m (including interest in suspense and ECL provision on off balance sheet items), relative to the amount of R27 767m, as previously published.. ››. This has resulted in a reduction in the Group’s retained income as at 1 January 2018 of R5 413m (after taxation adjustment of R2 063m and non-controlling interest of R328m), relative to the amount previously published of R4 106m (after taxation adjustment of R1 572m and non-controlling interest of R190m).. The IFRS 9 transition disclosures previously published as at 30 June 2018 have been restated. Normalised total assets increased 10% to R1 286bn at 31 December 2018, largely due to 13% growth in gross loans and advances to customers.. Gross loans and advances to customers Gross loans and advances to customers increased 13% to R872bn. RBB South Africa loans rose 6% to R488bn. Retail Banking South Africa’s loans grew 5% to R416bn, reflecting 12% growth in Vehicle and Asset Finance (VAF) and Personal Loans, 2% growth in Home Loans, while Card increased 4% despite a reduced store card portfolio. Business Banking South Africa’s gross loans rose 11% to R72bn, with term loans increasing 19%. CIB South Africa’s gross loans grew 25% to R275bn, including 23% higher term loans and reverse repurchase agreements up 52%. ARO’s gross loans increased 26% to R102bn or 12% in CCY.. Funding The Group’s liquidity position remains strong, with liquid assets and other sources of liquidity growing 2% to R218bn, which equates to 30% of customer deposits. The Group’s average liquidity coverage ratio for the fourth quarter was 117%, comfortably above the minimum regulatory hurdle of 90% during 2018. Deposits due to customers grew 7% to R736bn. The Group’s loans to deposit and debt securities ratio increased to 93.8% from 90.6%. Deposits due to customers constituted 72.3% of total funding. RBB South Africa’s deposits grew 11% to R333bn, with Retail Banking South Africa up 11% to R208bn and Business Banking South Africa increasing 10% to R125bn. CIB South Africa’s deposits fell 2% to R174bn. ARO’s deposits increased 23% to R134bn, or 10% in CCY.. Net asset value. Capital to risk-weighted assets Group risk-weighted assets (RWAs) grew 11% to R819bn at 31 December 2018, largely due to increased credit risk RWAs. The Group remains well capitalised, comfortably above minimum regulatory capital requirements. Its normalised CET 1 and total capital adequacy ratios were 12.0% and 15.4% (from 12.1% and 14.9%) respectively. The Group generated 2.0% of CET 1 capital internally over the past year. The day 1 impact from implementing IFRS 9 reduced the Group’s CET 1 ratio by 7 bps, as we opted to phase it in over three years. Declaring of a 4% higher full year DPS of 1 110 cents on a dividend cover of 1.7 times took into account the operating environment, the Group’s strong capital position, internal capital generation, strategy and growth plans.. 12. Absa Group Limited Financial results for the reporting period ended 31 December 2018. WorldReginfo - c6a885b5-80c8-4ff7-a852-fb065100e2f3. The Group’s normalised NAV rose 3% to R101m despite a R5.5bn reduction on adoption of IFRS 9 on 1 January 2018 and its NAV per share grew 4% to 11 985 cents. During the year it generated retained earnings of R15.9bn, from which it paid R9.0bn in ordinary dividends. Its foreign currency translation reserve increased by R2.6bn..

(15) 128 129 137 142 144. IFRS salient features Financials Notes to the financials Segment performance Barclays separation. 148 Overview of reporting changes 150 Initial adoption of IFRS 9 Financial Instruments (IFRS 9) 178 Adoption of IFRS 15 Revenue from Contracts with Customers (IFRS 15) 179 Accounting policy amendments. 184 Risk management overview 195 Capital management and RWA. 202 204 206 207 208 215. Segment report per market segment RBB Share performance Shareholder information and diary Glossary Abbreviations and acronyms. Profit and dividend announcement for the reporting period ended 31 December. Group performance (continued) Statement of comprehensive income The commentary below refers to normalised financial results.. Net interest income Net interest income increased 3% to R43 425m from R42 319m, while average interest-bearing assets grew 7%. The Group’s net interest margin (to average interest-bearing assets) declined to 4.64% from 4.83%, mostly due to transitioning to IFRS 9, which reduced the margin by 12 bps. Excluding the impact of IFRS 9, loan pricing decreased 3 bps, while composition added 3 bps to margin, given slower growth in Home Loans. Deposit pricing reduced the margin by 3 bps, primarily due to competitive pricing on fixed retail deposits in South Africa. Deposit composition decreased the margin by 3 bps, as average wholesale funding balances grew faster than customer deposits. With lower average interest rates in South Africa, the equity and deposit endowment reduced the Group margin by 5 bps. The structural hedge released R518m to the income statement, 3 bps more than the prior year, to largely offset the reduced endowment contribution. ARO reduced the margin by 2 bps due to lower interest rates. Treasury’s improving asset/liability construct in SA added 6 bps, partially offset by the reduction between prime and Johannesburg Interbank Average Rate (JIBAR).. Non-interest income Non-interest income grew 5% to R32 235m from R30 671m to account for 43% of total revenue from 42%. On a CCY basis, the growth was 6%. Net fee and commission income grew 4% to R22 523m, which represented 70% of total non-interest income. Within this, cheque account fees increased 9% to R5 401m, electronic banking grew 3% to R5 335m, while credit cards and merchant income rose by 6% and 9% respectively. Net trading excluding hedge accounting grew 7% to R5 183m, reflecting CIB Markets South Africa income increasing 10%, while ARO Markets income decreased 2%. RBB South Africa’s non-interest income grew 5% to R18 083m, as Retail Banking South Africa increased 6% and Business Banking South Africa grew 2%. Within Retail Banking, Transactional and Deposits rose 8%, reflecting price increases, debit card turnover, cheque account growth and the reclassifying of fee write-offs to credit impairments. CIB South Africa increased 7% to R4 589m, with 9% higher Corporate transactional banking revenue. ARO non-interest income grew 6% to R5 157m, or 9% in CCY, as CIB increased 3% and RBB 8%. WIMI’s non-interest income increased 6% to R5 514m, including 10% higher Life insurance net premium income and 8% growth in Short-term insurance net premium income.. Impairment losses on loans and advances Implementing IFRS 9 increased the Group’s IAS 39 credit provisions and interest in suspense by R7.0bn or 36% at 1 January 2018 to R28.9bn. This impact is R1.9bn higher than the amount previously published following a change in the treatment of post write-off recoveries in the calculation of accounting LGD. Previously reported IAS 39 impairment ratios in respect of performing and non-performing portfolios are not comparable to similar ratios under IFRS 9. At 31 December 2018 the Group’s stage 3 (defaulted) loans were 5.10% of gross loans and advances from 5.53% at 1 January 2018 and the ECL coverage ratios on these were 45.1% and 43.7% respectively.. WorldReginfo - c6a885b5-80c8-4ff7-a852-fb065100e2f3. At the IFRS Interpretations Committee (IFRS-IC) meeting held in November 2018, the committee concluded that any unrecognised interest, which is subsequently recovered should be presented as a credit impairment gain. Following this decision, the Group has amended its accounting treatment. This change does not impact profit or loss, but it does reduce both the Group’s ECL and interest income by R608m for the year ending 31 December 2018 (30 June 2018: R292m). Credit impairments decreased 10% to R6 324m from R7 022m, which improved the Group’s credit loss ratio to 0.73% from 0.87% of gross loans and advances to customers and banks. Excluding the IFRS-IC conclusion’s impact, credit impairments declined 1%. RBB South Africa credit impairments decreased 10% to R4 555m, resulting in a 0.94% credit loss ratio from 1.10%. Retail Banking South Africa credit impairments declined 9% to R4 313m, improving its credit loss ratio to 1.04% from 1.20%. Home Loans’ charge fell 84% to R113m resulting in a 0.05% credit loss ratio from 0.30%. Card and Payments’ credit loss ratio declined to 3.42% from 4.53%, given 23% lower credit impairments of R1 478m. Vehicle and Asset Finance credit impairments grew 29% to R1 096m, increasing its credit loss ratio to 1.02% from 0.87%. Personal Loans’ charge fell 1% to R1 105m and its credit loss ratio improved to 5.51% from 6.09%. Business Banking South Africa credit impairments decreased 12% to R242m, improving its credit loss ratio to 0.35% from 0.43%. CIB South Africa credit impairments increased 76% to R998m from R567m, due to a large single name exposure. Its credit loss ratio increased to 0.36% from 0.24%. ARO’s credit impairments fell 38% to R794m from R1 289m, reducing its credit loss ratio to 0.77% from 1.34%. Within this, RBB’s charge declined 14% to R820m, a 1.80% credit loss ratio, while CIB’s fell 91% to R32m or a 0.07% credit loss ratio.. Absa Group Limited Financial results for the reporting period ended 31 December 2018. 13.

(16) 5 Normalised Group performance 59 Segment performance IFRS Group performance Reporting changes Risk management Appendices. ›. 127 147 183 201. 6 7 9 10 11 18 25. Overview Reconciliation of IFRS to normalised results Normalised salient features Normalised salient features by segment Profit and dividend announcement Financials Notes to the financials. 60 Overview 64 Per market segment 66 Per geographical segment. 68 85 96 114. RBB South Africa CIB South Africa Absa Regional Operations WIMI. Profit and dividend announcement for the reporting period ended 31 December. Group performance (continued) Statement of comprehensive income (continued) Operating expenses Group operating expenses grew 5%, (CCY + 6%), to R43 642m from R41 403m, resulting in a 57.7% cost-to-income ratio from 56.7%. Staff costs grew 4% and accounted for 55% of total operating expenses. Salaries rose 7% and total incentives fell 2%. Headcount decreased 2% to 40 856, largely due to reductions in South Africa and a disposal in WIMI. Non-staff costs grew 7%. Professional fees grew 7% to R1 820m, while telephone and postage increased 1% and printing and stationery decreased 1%. Operating leases on properties were flat at R1 606m and property costs increased 2% to R1 759m. Marketing costs decreased 7% to R1 595m reflecting lower product campaign spend. Total IT-related spend grew 7% to R7 886m and constituted 18% of Group operating expenses. Amortisation of intangible assets rose 25% to R815m, while cash transportation increased 16% to R1 266m. The 17% growth in depreciation reflects investment in technology and optimisation of the corporate property portfolio and branch network. RBB South Africa costs grew 5% to R25 770m. Retail Banking South Africa increased 5% and Business Banking South Africa 5%, due to salary increases, amortisation of IT infrastructure, digital fraud losses and one-off restructuring and rebranding initiatives. CIB South Africa expenses grew 12% to R6 304m, after two years of low cost growth, due to investment in systems and technology and building out capabilities after separating from Barclays PLC. ARO’s expenses increased 6%, or 8% in CCY, to R9 535m due to incremental costs following separation from Barclays PLC and high inflation rates in some countries. CIB increased 13% and RBB grew 3%. WIMI’s costs declined 5% to R3 098m, due to disposals, as continuing business line costs grew 4%. Positive operating Jaws improved its costefficiency ratio to 33.3%.. Taxation The Group’s taxation expense increased 8% to R6 766m, slightly above the 5% higher pre-tax profit, resulting in a 28.1% effective tax rate from 27.5%.. Segment performance RBB South Africa Headline earnings increased 2% to R8 880m, due to 10% lower credit impairments as pre-provision profits declined 2%. Revenue grew 2% to R43 591m, with non-interest income increasing 5%. Costs rose 5% to R25 770m, resulting in a 59.1% cost-to-income ratio from 57.4%. The credit loss ratio improved to 0.94% from 1.10%. RBB South Africa generated a return on regulatory capital (RoRC) of 24.0% and constituted 53% of total normalised headline earnings excluding the Group centre.. Headline earnings grew 2% to R6 359m, primarily due to 9% lower credit impairments. Card and Payments earnings grew 15% to R1 723m, as a result of 23% lower credit impairments and 13% growth in acquiring turnover. Despite 7% higher pre-provision profits, Transactional and Deposits earnings fell 3% to R2 311m, because of significantly higher credit impairments. Home Loans earnings were flat at R1 736m, as credit impairments fell 84% to offset 9% lower revenue due to the impact of IFRS 9 and IFRS-IC conclusion. Vehicle and Asset Finance earnings fell 9% to R877m, as 29% higher credit impairments outweighed 5% higher pre-provision profits. Personal Loans earnings increased 7% to R461m, due to a combination of pre-provision profits rising 2% and credit impairments declining by 1%. Retail Banking South Africa accounted for 38% of normalised headline earnings excluding the Group centre.. Business Banking South Africa Headline earnings increased 1% to R2 521m. Pre-provision profits were flat, given 5% cost growth due to continued investment in frontline staff and systems. Credit impairments fell 12%, due to IFRS-IC conclusion. Business Banking South Africa generated 15% of overall normalised headline earnings excluding the Group centre.. CIB South Africa Headline earnings decreased 1% to R3 367m, primarily due to 76% higher credit impairments. Pre-provision profits grew 5% although 12% higher costs exceeded 8% revenue growth. Corporate earnings grew 4% to R1 171m, largely due to 11% revenue growth. Investment Bank earnings decreased 4% to R2 196m, due to 70% higher credit impairments. CIB South Africa contributed 20% of total normalised headline earnings excluding the Group centre and generated a 15.6% RoRC.. 14. Absa Group Limited Financial results for the reporting period ended 31 December 2018. WorldReginfo - c6a885b5-80c8-4ff7-a852-fb065100e2f3. Retail Banking South Africa.

(17) 128 129 137 142 144. IFRS salient features Financials Notes to the financials Segment performance Barclays separation. 148 Overview of reporting changes 150 Initial adoption of IFRS 9 Financial Instruments (IFRS 9) 178 Adoption of IFRS 15 Revenue from Contracts with Customers (IFRS 15) 179 Accounting policy amendments. 184 Risk management overview 195 Capital management and RWA. 202 204 206 207 208 215. Segment report per market segment RBB Share performance Shareholder information and diary Glossary Abbreviations and acronyms. Profit and dividend announcement for the reporting period ended 31 December. Segment performance (continued) Absa Regional Operations Headline earnings grew 9%, or 13% in CCY, to R3 218m, largely due to 38% lower credit impairments. Pre-provision profits increased 3%. Revenue grew 5% to R16 323m. Costs grew 6% to R9 535m, resulting in a 58.4% cost-to-income ratio. RBB earnings increased 26% to R844m, or 29% in CCY, given positive operating leverage and 14% lower credit impairments. CIB earnings grew 7%, or 11% in CCY, to R2 508m as its credit impairments dropped 91%. ARO accounted for 19% of total normalised headline earnings excluding the Group centre and produced a 18.5% RoE.. Wealth, Investment Management and Insurance Headline earnings grew 3% to R1 268m, while earnings from continuing business lines increasing 8% to R1 195m. Gross operating income grew 10% to R6 869m and costs decreased 3% to R3 740m. Life insurance earnings grew 4% to R870m. The embedded value of new business increased 15%. Investment Cluster earnings declined 6%, largely due to margin compression since assets under management grew 1% to R337bn. Short-term insurance earnings grew 32% to R299m. South Africa underwriting margins increased to 9.6%. WIMI’s South Africa earnings increased 9% to R1 326m, while Africa Regions reported a loss of R58m. WIMI’s RoE improved to 21.7% and it generated 8% of total earnings excluding the Group centre.. Prospects South Africa’s economic growth outlook for 2019 appears relatively modest. We see only tentative growth for consumer spending of 1.5%, with probably more downside than upside risks. On the view that the consumer remains constrained and business confidence tentative, we forecast GDP growth of 1.7% in 2019. Eskom’s challenges are one key uncertainty for 2019, as is the global environment. Beyond the election, the economy is likely to remain a challenge for fiscal policy, while we expect the Reserve Bank to leave interest rates unchanged for some time. In our Africa regions markets, we forecast real GDP growth of 5.9% with risks tilted to the downside. Infrastructure investment, improved mining output and agriculture should help support growth in 2019. Global uncertainties will continue to weigh on the currency, inflation and interest rate outlook in the region. Based on these assumptions, and excluding any major unforeseen political, macroeconomic or regulatory developments, we expect stronger deposit growth this year and it should exceed our loan growth. We again see better loan growth from Absa Regional Operations in CCY than from South Africa, where momentum should continue. Our net interest margin is likely to decline slightly. Costs will remain well controlled and we are targeting positive operating Jaws for the full year, although this could be challenging in the first half, given the slow start we expect from the economy and financial markets. Our credit loss ratio is likely to increase off a low base. Our Group CET 1 ratio should remain above board targets and we are comfortable with our dividend cover at current levels. Lastly, our RoE should increase slightly in 2019, on the path to achieving our target of 18% to 20% by 2020.. Normalised financial results as a consequence of Barclays PLC separation On 1 March 2016, Barclays PLC announced its intention to sell down its 62.3% interest in the Group. A comprehensive separation programme was initiated by Barclays PLC and the Group to determine possible interactions between the companies to ensure that the Group can operate as an independent and sustainable group without the involvement of Barclays PLC. Barclays PLC currently holds 14.9% in the Group.. WorldReginfo - c6a885b5-80c8-4ff7-a852-fb065100e2f3. As part of its divestment Barclays PLC contributed £765m to the Group, primarily in recognition of the investments required for the Group to separate from Barclays PLC. Investments will be made primarily in rebranding, technology and separation-related projects and it is expected that these will neutralise the capital and cash flow impact of separation investments on the Group over time. The separation process will have an impact on the Group’s financial results for the next few years, most notably by increasing the capital base in the near term and generating endowment revenue thereon, with increased costs over time as the separation investments are concluded ahead of the associated benefit realisation. International Financial Reporting Standards (IFRS) require that the Barclays PLC contribution be recognised directly in equity, while the subsequent investment expenditure (including the depreciation or amortisation of capitalised assets) will be recognised in profit or loss. The aforementioned will result in a disconnect between underlying business performance and the IFRS financial results during the separation period. Normalised financial results will therefore be disclosed while the underlying business performance is materially different from the IFRS financial results. The following presents the items which have been excluded from the normalised financial results: ››. Barclays PLC contribution (including the endowment benefit). ››. Hedging linked to separation activities. ››. Technology and brand separation projects. ››. Depreciation and amortisation on the aforementioned projects. ››. Transitional service payments to Barclays PLC. ››. Employee cost and benefits linked to separation activities. ››. Separation project execution and support cost. Absa Group Limited Financial results for the reporting period ended 31 December 2018. 15.

(18) 5 Normalised Group performance 59 Segment performance IFRS Group performance Reporting changes Risk management Appendices. ›. 127 147 183 201. 6 7 9 10 11 18 25. Overview Reconciliation of IFRS to normalised results Normalised salient features Normalised salient features by segment Profit and dividend announcement Financials Notes to the financials. 60 Overview 64 Per market segment 66 Per geographical segment. 68 85 96 114. RBB South Africa CIB South Africa Absa Regional Operations WIMI. Basis of preparation for the reporting period ended 31 December. Basis of presentation The Group’s annual financial results have been prepared in accordance with the recognition and measurement requirements of International Financial Reporting Standards (IFRS), interpretations issued by the IFRS Interpretations Committee (IFRS-IC), the South African Institute of Chartered Accountants’ Financial Reporting Guides as issued by the Accounting Practices Committee, Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council, the JSE Listings Requirements and the requirements of the Companies Act. The principal accounting policies applied are set out in the Group’s most recent audited annual consolidated financial statements. The information disclosed in the condensed consolidated financial results is derived from information contained in the audited annual consolidated financial statements does not contain full or complete disclosure details. Any investment decisions by shareholders should be based on consideration of the consolidation of the audited annual consolidated financial statements, which is available on request. The preparation of financial information requires the use of estimates and assumptions about future conditions. Use of available information and application of judgement are inherent in the formation of estimates. The accounting policies that are deemed critical to the Group’s results and financial position, in terms of the materiality of the items to which the policies are applied, and which involve a high degree of judgement including the use of assumptions and estimation, are impairment of loans and advances, goodwill impairment, fair value measurements, impairment of available-for-sale financial assets, consolidation of structured or sponsored entities, post-retirement benefits, provisions, income taxes, share-based payments, liabilities arising from claims made under short-term and long-term insurance contracts and offsetting of financial assets and liabilities.. Accounting policies The accounting policies applied in preparing the condensed consolidated annual financial results are the same as those in place for the reporting period ended 31 December 2017 except for: 1. Changes of the Group’s operating segments and business portfolios, which have been presented in the reporting overview on the inside front cover. 2. Correction of certain due for settlement accounts in respect of long and short proprietary positions with the JSE have been incorrectly netted in the prior period. 3. Accounting policy changes with respect to the measurement of policyholder liabilities and specifically, with regards to the calculation of discretionary margins held within policyholder reserves (refer to page 36 for more details). 4.. doption of new International Financial Reporting Standards (IFRS), specifically IFRS 9 Financial Instruments (IFRS 9) and IFRS 15 Revenue A from Contracts with Customers (IFRS 15) (refer to pages 36 to 39 for more details) as indicated in the reporting changes section on pages 152 to 157. This section includes the impact of the adoption of IFRS 9 and specifically the transitional disclosures as required by IFRS 7 Financial Instrument Disclosures (IFRS 7).. Ernst & Young Inc., Absa Group Limited’s independent auditors, have audited the consolidated annual financial statements of Absa Group Limited from which management prepared the condensed consolidated financial results. The condensed consolidated financial results comprise the condensed consolidated statement of financial position as at 31 December 2018, condensed consolidated statement of comprehensive income, condensed statement of changes in equity and condensed consolidated statement of cash flows for the period then ended and selected explanatory notes, excluding items not indicated as audited. The audit report of the consolidated annual financial statements is available for inspection at Absa Group Limited’s registered office.. Events after the reporting period Absa Group Limited CEO, Maria Ramos announced her retirement on the 29 January 2019, effective 28 February 2019. The Board has appointed René van Wyk as Absa’s Interim Chief Executive with effect from 1 March 2019. Apart from the above mentioned, the directors are not aware of any other events (as defined per IAS10 Events after the Reporting Period) after the reporting date of 31 December 2018 and the date of authorisation of these annual consolidated and separate financial statements. On behalf of the Board W E Lucas-Bull. J P Quinn. Group Chairman. Financial Director. Johannesburg 11 March 2019. 16. Absa Group Limited Financial results for the reporting period ended 31 December 2018. WorldReginfo - c6a885b5-80c8-4ff7-a852-fb065100e2f3. Auditor’s report.

(19) 128 129 137 142 144. IFRS salient features Financials Notes to the financials Segment performance Barclays separation. 148 Overview of reporting changes 150 Initial adoption of IFRS 9 Financial Instruments (IFRS 9) 178 Adoption of IFRS 15 Revenue from Contracts with Customers (IFRS 15) 179 Accounting policy amendments. 184 Risk management overview 195 Capital management and RWA. 202 204 206 207 208 215. Segment report per market segment RBB Share performance Shareholder information and diary Glossary Abbreviations and acronyms. Dividend announcement for the reporting period ended 31 December. Declaration of ordinary dividend number 65 Shareholders are advised that an ordinary dividend of 620 cents per ordinary share was declared on 11 March 2019, for the period ended 31 December 2018. The ordinary dividend is payable to shareholders recorded in the register of members of the Company at the close of business on 12 April 2019. The directors of Absa Group Limited confirm that the Group will satisfy the solvency and liquidity test immediately after completion of the dividend distribution. The dividend will be subject to local dividends withholding tax at a rate of 20%. In accordance with paragraphs 11.17 (a) (i) to (ix) and 11.17 (c) of the JSE Listings Requirements, the following additional information is disclosed: ››. The dividend has been declared out of income reserves.. ››. The local dividend tax rate is twenty per cent (20%).. ››. The gross local dividend amount is 620 cents per ordinary share for shareholders exempt from the dividend tax.. ››. The net local dividend amount is 496 cents per ordinary share for shareholders liable to pay the dividend tax.. ››. Absa Group Limited currently has 847 750 679 ordinary shares in issue (includes 20 273 8111 treasury shares).. ››. Absa Group Limited’s income tax reference number is 9150116714.. In compliance with the requirements of Strate, the electronic settlement and custody system used by the JSE Limited, the following salient dates for the payment of the dividend are applicable: Last day to trade cum dividend. Tuesday, 9 April 2019. Shares commence trading ex dividend. Wednesday, 10 April 2019. Record date. Friday, 12 April 2019. Payment date. Monday, 15 April 2019. Share certificates may not be dematerialised or rematerialised between Wednesday, 10 April 2019 and Friday, 12 April 2019, both dates inclusive. On Monday, 15 April 2019, the dividend will be electronically transferred to the bank accounts of certificated shareholders. The accounts of those shareholders who have dematerialised their shares (which are held at their participant or broker) will also be credited on Monday, 15 April 2019 On behalf of the Board N R Drutman Group Company Secretary Johannesburg 11 March 2019. 1. WorldReginfo - c6a885b5-80c8-4ff7-a852-fb065100e2f3. Absa Group Limited is a company domiciled in South Africa. Its registered office is 7th Floor, Absa Towers West, 15 Troye Street, Johannesburg, 2001.. Includes shares to be utilised when establishing a BBBEE structure.. Absa Group Limited Financial results for the reporting period ended 31 December 2018. 17.

(20) 5 Normalised Group performance 59 Segment performance IFRS Group performance Reporting changes Risk management Appendices. ›. 127 147 183 201. 6 7 9 10 11 18 25. Overview Reconciliation of IFRS to normalised results Normalised salient features Normalised salient features by segment Profit and dividend announcement Financials Notes to the financials. 60 Overview 64 Per market segment 66 Per geographical segment. 68 85 96 114. RBB South Africa CIB South Africa Absa Regional Operations WIMI. Condensed consolidated normalised statement of comprehensive income for the reporting period ended 31 December. Net interest income. Note. 2018 Rm. 2017 Rm. Change %. 2. 43 425. 42 319. 3. Interest and similar income. 89 177. 85 918. 4. Effective interest income1 Other interest income1. 87 575 1 602. 84 645 1 273. 3 26. (45 752). (43 599). 5. (45 752). (43 599). 5. 32 235. 30 671. 5. 22 523. 21 711. 4. 3.1 3.1. 25 675 (3 152). 24 724 (3 013). 4 5. 3.2 3.3 3.4 3.5 3.6 3.7. 7 190 (3 565) 808 5 270 (636) 645. 6 598 (3 334) (2 023) 5 172 1 905 642. 9 7 <(100) 2 <(100) 0. 4. 75 660 (6 324). 72 990 (7 022). 4 (10). 69 336 (43 642) (1 832). 65 968 (41 403) (1 876). 5 5 (2). (434) (1 398). (322) (1 554). 35 (10). 179. 170. 5. 24 041 (6 766). 22 859 (6 290). 5 8. 17 275. 16 569. 4. 15 903 831 351 190. 15 370 789 362 48. 3 5 (3) >100. 17 275. 16 569. 4. 1 886.7 1 883.3. 1 815.7 1 815.5. 4 4. Interest expense and similar charges Effective interest expense. 1. Non-interest income. 3. Net fee and commission income Fee and commission income Fee and commission expense Net insurance premium income Net claims and benefits incurred on insurance contracts Changes in investment and insurance contract liabilities2 Gains and losses from banking and trading activities Gains and losses from investment activities Other operating income Total income Impairment losses Operating income before operating expenditure Operating expenditure Other expenses Other impairments Indirect taxation. 5. 6. Share of post-tax results of associates and joint ventures Operating profit before income tax Taxation expense1. 7. Profit for the reporting period Ordinary equity holders2 Non-controlling interest – ordinary shares Non-controlling interest – preference shares Non-controlling interest – Tier 1 capital. Earnings per share: Basic earnings per share (cents)2 Diluted basic earnings per share (cents)2. 18. 1 1. 1. An amendment was made to IAS 1 Presentation of Financial Statements, which was effective from 1 January 2018. The amendment requires interest and similar income which is calculated using the effective interest method, to be presented separately on the face of the statement of comprehensive income.. 2. These numbers have been restated, refer to the report overview on the inside cover page.. Absa Group Limited Financial results for the reporting period ended 31 December 2018. WorldReginfo - c6a885b5-80c8-4ff7-a852-fb065100e2f3. Profit attributable to:.

(21) 128 129 137 142 144. IFRS salient features Financials Notes to the financials Segment performance Barclays separation. 148 Overview of reporting changes 150 Initial adoption of IFRS 9 Financial Instruments (IFRS 9) 178 Adoption of IFRS 15 Revenue from Contracts with Customers (IFRS 15) 179 Accounting policy amendments. 184 Risk management overview 195 Capital management and RWA. 202 204 206 207 208 215. Segment report per market segment RBB Share performance Shareholder information and diary Glossary Abbreviations and acronyms. Condensed consolidated normalised statement of comprehensive income for the reporting period ended 31 December. 2018 Rm. 2017 Rm. Change %. 17 275. 16 569. 4. 53. (179). <(100). 27. —. 100. 38 (11). — —. 100 100. (13). (147). (91). (71). (147). (52). 58. —. 100. 39. (32). <(100). (26) 55 10. (91) 44 15. (71) 25 (33). 2 221. (1 327). <(100). Movement in foreign currency translation reserve. 3 058. (2 219). <(100). Differences in translation of foreign operations Releases to profit or loss. 3 058 —. (2 271) 52. <(100) (100). (247). 794. <(100). 265 (58). 1 465. (82) (100). Profit for the reporting period1 Items that will not be reclassified to profit or loss Movement on equity instruments measured at FVOCI Fair value gains Deferred tax Movement of liabilities designated at FVTPL due to changes in own credit risk Fair value losses Deferred tax Movement in retirement benefit fund assets and liabilities Decrease in retirement benefit surplus Decrease in retirement benefit deficit Deferred tax Items that are or may be subsequently reclassified to profit or loss. Movement in cash flow hedging reserve Fair value gains Amounts transferred within other comprehensive income Amount removed from other comprehensive income and recognised in profit or loss Deferred tax Movement in fair value of debt instruments measured at FVOCI Fair value losses Release to profit or loss Deferred tax Movement in available-for-sale reserve Fair value gains Release to profit or loss Deferred tax Total comprehensive income for the reporting period. (550). —. 96. (365) (306). 51 <(100). (590). —. (100). (750) (9) 169. — — —. (100) (100) 100. —. 98. (100). — — —. 154 67 (123). (100) (100) 100. 19 549. 15 063. 30. 17 808 1 200 351 190. 14 137 516 362 48. 26 >100 (3) >100. 19 549. 15 063. 30. WorldReginfo - c6a885b5-80c8-4ff7-a852-fb065100e2f3. Other comprehensive income. Total comprehensive income attributable to: Ordinary equity holders1 Non-controlling interest – ordinary shares Non-controlling interest – preference shares Non-controlling interest – Tier 1 capital. 1. These numbers have been restated, refer to the report overview on the inside cover page.. Absa Group Limited Financial results for the reporting period ended 31 December 2018. 19.

(22) 5 Normalised Group performance 59 Segment performance IFRS Group performance Reporting changes Risk management Appendices. ›. 127 147 183 201. 6 7 9 10 11 18 25. Overview Reconciliation of IFRS to normalised results Normalised salient features Normalised salient features by segment Profit and dividend announcement Financials Notes to the financials. 60 Overview 64 Per market segment 66 Per geographical segment. 68 85 96 114. RBB South Africa CIB South Africa Absa Regional Operations WIMI. Condensed consolidated normalised statement of financial position as at 31 December. 2018 Rm. 2017 Rm. Change %. 46 929 135 420 53 140 128 569 2 411 30 455 802 239 841 720 618 18 481 1 310 508 15 536 5 983 3 431. 48 669 111 409 55 426 132 183 2 673 24 576 314 1 308 749 772 892 18 936 1 235 231 15 177 4 591 1 291. (4) 22 (4) (3) (10) 24 >100 (82) 12 (31) (2) 6 >100 2 30 >100. 1 285 552. 1 168 683. 10. 121 421 51 632 1 343 36 058 3 893 693 124 736 305 160 971 5 711 29 674 4 168 20 225 481. 67 390 64 047 1 123 34 933 2 945 352 48 689 867 137 948 9 950 30 585 4 342 15 895 752. 80 (19) 20 3 32 97 >100 7 17 (43) (3) (4) 27 (36). 1 172 699. 1 060 177. 11. 1 680 3 657 89 124 6 239. 1 691 3 949 87 982 4 240. (1) (7) 1 47. Non-controlling interest – ordinary shares Non-controlling interest – preference shares Non-controlling interest – Tier 1 capital. 100 700 4 768 4 644 2 741. 97 862 4 500 4 644 1 500. 3 6 — 83. Total equity. 112 853. 108 506. 4. 1 285 552. 1 168 683. 10. Note. Assets Cash, cash balances and balances with central banks Investment securities Loans and advances to banks Trading portfolio assets Hedging portfolio assets Other assets1 Current tax assets Non-current assets held for sale Loans and advances to customers Reinsurance assets Investments linked to investment contracts Investments in associates and joint ventures Investment property Property and equipment Goodwill and intangible assets Deferred tax assets. 8. Total assets. Liabilities Deposits from banks Trading portfolio liabilities Hedging portfolio liabilities Other liabilities1 Provisions Current tax liabilities Non-current liabilities held for sale Deposits due to customers Debt securities in issue Loans from Barclays separation segment Liabilities under investment contracts Policyholder liabilities under insurance contracts1 Borrowed funds Deferred tax liabilities1. 9 10. 11. Total liabilities. Attributable to ordinary equity holders: Share capital Share premium Retained earnings1 Other reserves. Total liabilities and equity. 1. 20. These numbers have been restated, refer to the report overview on the inside cover page.. Absa Group Limited Financial results for the reporting period ended 31 December 2018. 11 11. WorldReginfo - c6a885b5-80c8-4ff7-a852-fb065100e2f3. Equity Capital and reserves.

(23) 128 129 137 142 144. IFRS salient features Financials Notes to the financials Segment performance Barclays separation. 148 Overview of reporting changes 150 Initial adoption of IFRS 9 Financial Instruments (IFRS 9) 178 Adoption of IFRS 15 Revenue from Contracts with Customers (IFRS 15) 179 Accounting policy amendments. 184 Risk management overview 195 Capital management and RWA. 202 204 206 207 208 215. Segment report per market segment RBB Share performance Shareholder information and diary Glossary Abbreviations and acronyms. WorldReginfo - c6a885b5-80c8-4ff7-a852-fb065100e2f3. This page has been left blank intentionally. Absa Group Limited Financial results for the reporting period ended 31 December 2018. 21.

(24) 5 Normalised Group performance 59 Segment performance IFRS Group performance Reporting changes Risk management Appendices. ›. 127 147 183 201. 6 7 9 10 11 18 25. Overview Reconciliation of IFRS to normalised results Normalised salient features Normalised salient features by segment Profit and dividend announcement Financials Notes to the financials. 60 Overview 64 Per market segment 66 Per geographical segment. 68 85 96 114. RBB South Africa CIB South Africa Absa Regional Operations WIMI. Condensed consolidated normalised statement of changes in equity. Restated balance at the end of the previous reporting period Impact of adopting new accounting standards at 1 January 2018 IFRS 9 IFRS 15 Adjusted balance at the beginning of the reporting period Total comprehensive income Profit for the period Other comprehensive income Dividends paid during the reporting period Distributions paid during the reporting period Issuance of Additional Tier 1 Capital Purchase of Group shares in respect of equity-settled share-based payment arrangements Elimination of the movement in treasury Movement in share-based payment reserve Transfer from share-based payment reserve Value of employee services Deferred tax Movement in general credit-risk reserve Movement in foreign insurance subsidiary regulatory reserve Share of post-tax results of associates and joint ventures Balance at the end of the reporting period. Balance at the end of the previous reporting period Restatement owing to the change in life insurance accounting policy Restated balance at the beginning of the reporting period Total comprehensive income Profit for the period Other comprehensive income Dividends paid during the reporting period Distributions paid during the reporting period Shares issued Purchase of Group shares in respect of equity-settled share-based payment arrangements Elimination of the movement in Treasury shares Movement in share-based payment reserve Transfer from share-based payment reserve Value of employee services Deferred tax Movement in general credit-risk reserve Share of post-tax results of associates and joint ventures Disposal of non-controlling interest2 Shareholder contribution – fair value of investment3 Restated balance at the end of the reporting period 1 2 3. 22. Total other reserves Rm. General creditrisk reserve Rm. 87 9821. 4 240. 779. — —. (5 413) (44). (126) —. — —. 1 691 — — — — — —. 3 949 — — — — — —. 82 525 15 924 15 903 21 (9 033) — —. 4 114 1 884 — 1 884 — — —. 779 — — — — — —. — (5 361) — — — — —. — (11) — — — — —. (491) (292) 491 491 — — —. (68) — — — — — (44). — — 17 (491) 531 (23) 44. — — — — — — 44. — — 840 193. — — 1 680. — — 3 657. (1) (179) 89 124. 1 179 6 239. — — 823. General creditrisk reserve Rm. Number of ordinary shares ’000. Share capital Rm. Share premium Rm. 845 554. 1 691. 3 949. — —. — —. 845 554 — — — — — —. Retained earnings Rm. Number of ordinary shares ’000. Share capital Rm. Share premium Rm. Retained earnings Rm. Total other reserves Rm. 846 675. 1 693. 4 467. 81 604. 5 293. 757. — 846 675 — — — —. — 1 693 — — — —. — 4 467 — — — —. 134 81 738 15 197 15 370 (173) (8 822). — 5 293 (1 060) — (1 060) —. —. —. —. —. — 757 — — — — — —. — (2) — — — — — — — — 1 691. (742) (518) 742 742 — — — — — — 3 949. 13 — — — — — (22) (170) — 48 87 982. — — (185) (742) 525 32 22 170 — — 4 2402. — — — — — — 22 — — — 779. — — (1 121) — — — — — — — — 845 554. These numbers have been restated, refer to the report overview on the inside cover page. The Group disposed of its controlling stake in a non-core subsidiary which was classified as held for sale. CLS Group Holding AG shares were transferred to Barclays PLC for no consideration in 2005. During the prior reporting period these shares were transferred back to the Group for a nominal consideration of one British Pound Sterling (GBP). The shares have been recognised at a fair value of R48m. The related credit has been recognised in equity as a shareholder contribution.. Absa Group Limited Financial results for the reporting period ended 31 December 2018. WorldReginfo - c6a885b5-80c8-4ff7-a852-fb065100e2f3. for the reporting period ended 31 December.